If you're buying or selling a home in Flower Mound, Southlake, or anywhere across North Texas, there's one number that can make or break your budget: the mortgage rate.
After several years of high borrowing costs, rates have started to ease. And according to many top financial analysts and real estate economists, there's still room for them to fall even further into 2026.
So what’s behind this growing optimism? It turns out a familiar financial trend—grounded in over 50 years of data—is pointing to better news ahead.
Let’s take a closer look at what’s happening, what’s expected, and what it means if you’re planning to buy or sell real estate in DFW’s most sought-after suburbs.
What Drives Mortgage Rates in the U.S. Housing Market?
Mortgage rates don’t move randomly. They’re influenced by a number of complex financial factors, including inflation, job growth, and the Federal Reserve’s interest rate decisions.
But perhaps the most reliable predictor over the long-term? The 10-year treasury yield.
For more than five decades, the average 30-year fixed mortgage rate has closely tracked the movements of the 10-year U.S. Treasury yield. When that yield goes up, mortgage rates tend to follow. When it drops, mortgage rates usually fall too.
This long-standing connection makes the 10-year yield a critical indicator for where rates are headed—and right now, it’s signaling good news.
✅ Takeaway: The 10-year treasury yield has been a reliable predictor of mortgage rates for over 50 years—and it's pointing toward a possible drop.
What Is the ‘Spread’ and Why Is It Important for Mortgage Rates?
While the 10-year yield helps forecast rate direction, there’s another key factor to watch: the spread.
The spread refers to the difference between the 10-year treasury yield and the 30-year fixed mortgage rate. Historically, this spread averages 1.76 percentage points (or 176 basis points).
But in recent years, that spread has been much wider than usual, mostly due to market uncertainty, inflation fears, and cautious investors. That extra “buffer” has kept mortgage rates higher than what treasury yields alone would suggest.
Now, here’s the good news: the spread is finally starting to shrink.
A narrower spread indicates greater market confidence—and more predictable economic outcomes—which often leads lenders to offer more competitive mortgage pricing.
As Redfin recently explained:
“A lower mortgage spread equals lower mortgage rates. If the spread continues to decline, mortgage rates could fall more than they already have.”
✅ Takeaway: As the mortgage spread narrows, rates could fall—even without major moves from the Fed.
Are Mortgage Rates Already Starting to Fall?
Yes, and the data shows we may only be at the beginning.
At the time of this writing, the 10-year treasury yield sits around 4.09%. If we apply the historical average spread of 1.76%, that implies a mortgage rate near 5.85%—significantly lower than the 7%+ rates we saw in 2023.
This calculation aligns with forecasts from housing economists and financial analysts, who see mortgage rates easing into the high 5s as we approach the end of 2026—assuming the economy continues stabilizing.
This is welcome news for buyers in higher-end DFW suburbs, where every fraction of a percentage can dramatically impact affordability.
✅ Takeaway: Based on treasury yields and historical spreads, mortgage rates could land near 5.85% in 2026—potentially saving buyers thousands in interest.
What Could Affect the Mortgage Rate Forecast for 2026?
Even though the outlook is optimistic, mortgage rates remain tied to several economic “wild cards.”
Here are the biggest variables to watch:
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Inflation: If inflation remains high, rates may stay elevated to keep prices in check.
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The Job Market: A strong labor market often leads to higher wages and inflation, while a slowdown can push rates down.
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Federal Reserve Policy: The Fed doesn't directly set mortgage rates, but its rate hikes and comments influence broader lending conditions.
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Global Economic Stability: Any major geopolitical or financial disruptions could send investors back to safer bonds, impacting yields.
✅ Takeaway: Rates are expected to trend down, but could bounce depending on inflation, job reports, and Fed decisions.
What Does This Mean for Flower Mound and Southlake Buyers?
If you’ve been holding off on buying your next home in Flower Mound, Southlake, or Argyle, you may soon have more flexibility—and more buying power.
Here’s why:
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Every 1% drop in mortgage rates gives you 10% more purchasing power.
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That means a family shopping for an $800K home today could qualify for $880K+ at a lower rate in 2026.
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This opens doors to popular luxury communities like:
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Bridlewood Golf Estates in Flower Mound
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Timarron and Southlake Town Square
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The Oaks of Argyle and Canyon Falls
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At the same time, falling rates often lead to increased buyer competition—especially in high-demand school zones like Carroll ISD and Flower Mound High School.
So while affordability improves, early preparation will give you a competitive edge.
✅ Takeaway: If you're planning a move in 2026, start strategizing now to maximize buying power and neighborhood options.
FAQs: Mortgage Rates in 2025–2026
Q1: Why do mortgage rates follow the 10-year treasury yield?
Because mortgage-backed securities behave similarly to long-term bonds, the 10-year yield provides a stable benchmark for lender pricing.
Q2: What is a “normal” mortgage rate spread?
Historically, the spread between the 10-year yield and 30-year mortgage rate averages about 1.76%.
Q3: Will mortgage rates fall below 5% in 2026?
While it's possible, most forecasts expect rates to settle in the 5.5% to 5.9% range by late 2026.
Q4: How does a lower mortgage rate impact my buying power?
Lower rates reduce your monthly payment and increase your loan affordability—potentially letting you afford more home for the same budget.
Mortgage rates are finally trending in the right direction—and that could unlock the perfect window to buy or sell your home in the next 12–18 months.
If you're curious how rate changes could impact your equity, affordability, or ideal timing, we’re here to guide you every step of the way.
As a faith-driven, local real estate team serving Flower Mound, Southlake, and North Texas, we’ll help you make the smartest move—whether you're upsizing, downsizing, or relocating.
📞 Ready to explore your options? Let's build your future together.
